The Arash Trap: Iran’s Lost Leverage After the 2026 War
The April 8, 2026, ceasefire that ended six weeks of U.S.-Israeli strikes against Iran has not brought order back to the Persian Gulf energy landscape. It has widened its cracks. This is now more obvious than in the dispute over the Arash/Al-Durra gas field, a contested joint gas field, now inflamed by the most destructive regional conflict in a generation. For Iran, the post-war moment is not about hitting the reset button. It is a convergence of structural disadvantages that had already shaped its behavior in shared energy fields long before the first missile fell on Asaluyeh.
A Field Already in Conflict
The Arash dispute is pre-2026 war. The field was discovered in 1967 before maritime boundaries were defined and lies at the intersection of overlapping concessions granted by Iran to the Anglo-Iranian Oil Company and by Kuwait to Royal Dutch Shell. “Iran has always argued that roughly 40% of the field is in its maritime jurisdiction (Press TV, 2025). Kuwait and Saudi Arabia have rejected this claim in its entirety. They have argued through repeated Gulf Cooperation Council (GCC) statements, most recently at the Council’s 46th Supreme session in December 2025, that the field is wholly within their jointly administered zone (Gulf Cooperation Council, 2025). In March 2022, Kuwait and Saudi Arabia signed a development agreement for the field without consulting Tehran, which was called illegal by Iran. The GCC called it sovereign. No mechanism existed to adjudicate the difference.
What the War Changed
The 2026 war has sped up all the trends already underway against Iran in the Arash/Al-Durra case. The trust is gone. Iran’s mid-March 2026 retaliatory attacks against Persian Gulf energy infrastructure targeting Ras Laffan in Qatar, refineries in Saudi Arabia and facilities in Kuwait triggered a regional response. Attacks against the kingdom meant “what little trust there was before has been completely shattered,” Saudi Arabia’s top diplomat said. This is not diplomatic speak. It is a statement of strategic fact: the interpersonal and institutional channels through which energy disputes are typically handled have been severed.
The GCC bloc is tighter. Iran’s attacks did what years of Saudi diplomacy failed to do: unite nearly all Arab countries of the Persian Gulf against Tehran. “Iran’s targeting of civilian infrastructure squarely brought into our orbit countries who perhaps would not have been as all-in as they are today,” U.S. Defense Secretary Pete Hegseth said, naming the UAE, Qatar, Bahrain, Kuwait and Saudi Arabia. This means that the Kuwait-Saudi axis, which excluded Iran from the 2022 development agreement, is now part of a hardened security coalition and backed by the United States.
Iran’s structural weaknesses run deeper. Even before the war, Iran had been struggling to develop the Arash field. Dudlák (2018) notes that the institutional fragmentation of Iran’s energy decision-making apparatus, the overlapping authority of the Ministry of Oil, the National Iranian Oil Company, and security-linked actors, as well as sanctions curbing access to capital and technology, have constrained Iran’s ability to develop the field. One Iranian official has suggested the conflict has caused US$270 billion in direct and indirect damages inside Iran – a figure which, if accurate, would set back any realistic energy development programme for years.
The legal ground has shifted further. Iran’s non-membership in UNCLOS already weakened its international legal standing in maritime boundary disputes (Pourahmadi Meibodi et al., 2025). The war has now added a dimension of accountability: the UAE has called for Iran to be held liable for reparations and damage, and is reportedly considering whether to freeze Iranian assets. Any future negotiation over Arash must now contend not just with unresolved boundary lines, but with active claims of financial liability against the Iranian state.
The Keohane Problem
Robert Keohane’s neoliberal institutionalist framework holds that institutions reduce transaction costs and lengthen the “shadow of the future”, the horizon of expected reciprocal interactions that makes cooperation rational even between self-interested states (Keohane, 1984). The Arash field has always lacked such an institution. What the 2026 war has done is destroy the informal, interpersonal substitutes that partly compensated.
The Persian Gulf states had responded to Iran’s attacks on their energy infrastructure by saying “a price must be paid” and that the attacks “cannot go unanswered.” This is the language of shortened time horizons: states signaling that they are no longer calculating long-term cooperative returns. In Keohane’s terms, the shadow of the future over the Arash field has contracted to its shortest point in decades. Without a shared institutional framework, every Iranian move on the field, drilling, seismic surveys, concession awards, will now be read through a security lens rather than an energy. The 2022 precedent, in which Iran threatened to begin drilling after the Kuwait-Saudi agreement, will be far more dangerous to repeat in the post-war environment.
Policy Recommendations
The Arash gas field dispute has always exemplified what happens when energy resources exist without governing institutions. The 2026 war did not create that problem, but it has made solving it far more difficult. Trust has been destroyed, the regional bloc against Iran has consolidated, and Tehran’s structural incapacity to act as a credible cooperative partner has deepened. Without a maritime boundary agreement between Iran and Kuwait-Saudi Arabia (the foundational missing piece identified in the original research) no durable arrangement over the field is achievable. The war has made that agreement harder to reach. For regional energy security, that is the most consequential long-term casualty of the 2026 conflict.
Nevertheless, complete diplomatic collapse is not inevitable. From a realist perspective centered on national interest and the balance of power, two policy orientations are available to Iran. First is a “limited deterrence and negotiation from a position of hidden weakness” strategy. Tehran should accept that, in the short term, it cannot develop the field independently. Instead of threatening military action or unilateral drilling (which would trigger the Arab‑US bloc response), Iran could propose through mediators, a “de‑escalation for a symbolic share of future revenues.” This is not a victory, but it would prevent the field from becoming another tool for imposing further sanctions on Iran.
Second is “Activating asymmetric leverage in other domains”. In realist logic, no single dossier can be separated from the broader regional power equation. Iran could signal readiness to clarify (without formal admission of liability) the damage inflicted on Saudi and Kuwaiti infrastructure, while in return seeking guarantees against unilateral development of Arash. Designing a package deal of this sort, combined with deepening Sino‑Iranian naval and security cooperation in the Persian Gulf could alter Riyadh’s and Washington’s calculations.
References
Bahmaei, M.A. and Afshar, E. (2025) ‘New Iran’s Petroleum Contract “IPC” in comparison with Buy-back and Production Sharing Agreement’, Energy Strategy Reviews, 5(7).
Dudlák, T. (2018) ‘After the sanctions: Policy challenges in transition to a new political economy of the Iranian oil and gas sectors’, Energy Policy, 121, p. 464.
Gulf Cooperation Council (2025b) Final statement issued by the Supreme Council at its 46th session. Available at: https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2025-12-3-3.aspx
Keohane, R.O. (1984) After Hegemony: Cooperation and Discord in the World Political Economy. Princeton: Princeton University Press.
Pourahmadi Meibodi, H., Dashtroo, F. and Varahrami, V. (2025) ‘Cooperative and Competitive Game Analysis between Iran, Kuwait, and Saudi Arabia in Management of the Arash (Al-Durra) Gas Field’, Journal of Petroleum Business Review. https://doi.org/10.22050/pbr.2025.516746.1387
Press TV (2025) ‘IRGC commander says Iran’s share of the Arash gas field is around 40%’, 10 May. Available at: https://www.presstv.ir/Detail/2025/05/10/747725/
United Nations Treaty Series (1971) Agreement concerning the boundary line dividing the continental shelf between Iran and Qatar. Available at: https://treaties.un.org/doc/Publication/UNTS/Volume%20787/volume-787-I-11197-English.pdf
Yong, W. (2013) NIOC and the State: Commercialization, Contestation and Consolidation in the Islamic Republic of Iran. Oxford: Oxford Institute for Energy Studies.
